IDB Holding Corp. Ltd. (TASE:IDBH) and subsidiary IDB Development Corporation, controlled by chairman Nochi Dankner, is exploiting market fears about the ability of its holding companies to repay their debts to buy back bonds at prices well below their adjusted values. Altogether, through buy-backs and redemptions, they have reduced their bond debt by NIS 900 million in the past two months.
In late 2011, IDB Development announced that its board of directors had approved a NIS 150 million bond buy-back, and on May 10, the board of its parent company, IDB Holding, approved a NIS 100 million bond buy-back. An examination by "Globes" has found that IDB Holding and IDB Development will report a NIS 60 million gain for these buy-backs in their financial reports for the second quarter.
During May, IDB Development's three largest bonds traded at prices reflecting yields of 12-20%, and IDB Holdings' three largest bonds traded at prices reflecting yields of 26-37%. The bonds' prices continued to slide as the buy-back was implemented.
The "Globes" examination found that, during May, IDB Development bought back bonds with a nominal value of NIS 100 million for NIS 60 million, and IDB Holding bought back bonds with a nominal value of NIS 60 million for NIS 40 million.
So far during June, IDB Holding and IDB Development have redeemed NIS 740 million in bonds, including NIS 500 million by IDB Development, bringing the total bond debt reduction to NIS 900 million over two months.
Following the bond buy-backs and redemptions, IDB Holding's bond debt is NIS 1.75 billion, and its total debt is NIS 2 billion. The company has NIS 250 million in cash. IDB Development's outstanding bond debt is NIS 3.5 billion, and its total debt is NIS 6 billion. The company has NIS 500 million in cash.
Although IDB has met its obligations so far, the yields on its bonds are at their highest levels since IDB Holding announced in late March that it would need NIS 375 million in additional financial sources over the next two years to meet its obligations. The current bond yields are 53-61%.
IDB holding company Discount Investment Corporation (TASE: DISI) and its subsidiary Koor Industries Ltd. (TASE:KOR) also have bond buy-back plans totalling NIS 250 million and NIS 100 million, respectively, although there have been little actual purchases so far.
In addition, over the past month, Dankner has personally bought IDB Holding shares, on an almost daily basis. In the past two weeks, his private company Ganden Investments Ltd. has bought NIS 16 million worth of shares, after a 64% plunge in its share price, to give a current market cap of NIS 640 million.
Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2012
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